GERMAN PRIVATE banks have made a concerted call to centralise all euro zone financial regulation under the auspices of the European Central Bank.
The BDB banking association, representing private lenders such as Deutsche and Commerzbank, said shifting oversight of the euro zone’s 6,000 lenders to the Frankfurt bank would “remove the influence of national politics in supervision”.
“A legally independent unit should be created under the roof of the ECB and overseen politically by the EU level,” wrote the association in a position paper.
It follows a commitment by EU leaders in Brussels at the end of June to create a “banking union” and a call for the European Commission to present a proposal by next month.
Such a union, with improved regulation, has been proposed as an answer to the current heterogenous system of national regulation regimes which, critics say, failed to sound the warning ahead of the euro zone crisis.
“If one calls for a strong Europe, one has to be ready to transfer certain competencies to the European level,” said Andreas Schmitz, BDB president in a statement. “Without being willing to do that, the idea of a true banking union in Europe will remain incomplete.”
The BDB suggested that national regulators would be downgraded to “ECB country offices”, with powers to oversee smaller banks. Under such a system, nothing need change in “material oversight standards” for small and medium-sized banks.
However German private lenders insisted there could be “no differentiation” between banks deemed of systemic relevance to euro zone financial stability and other institutions.
“The crisis in the Spanish savings banks shows once again that it cannot be predicted which institution or institutional sector can pose a threat to financial stability,” said Mr Schmitz. That is a hotly contested proposal among Germany’s large public sector lenders. They have argued that only the top 25 big banks in the EU should be subject to central regulation.
The proposals are similarly controversial with the Bundesbank and Bafin, Germany’s national regulator. For years, the latter has resisted attempts to force it under the auspices of the former.
Nothing should change for national regulators outside the euro zone, the association suggested, though they could, if they wished, voluntarily place their banking systems under ECB supervision voluntarily.
The ambitious plan to create a new euro zone banking regulator has several important hurdles to clear. Chief among these is how to allow an independent regulator operate inside the ECB, and policing implementation of central bank demands while acting as an ombudsman in disputes between the ECB and banks. A new regulator within the ECB would adopt tasks once envisaged for the London-based European Banking Authority. The BDB suggested the ECB could assume the national voting rights at the EBA or Basel Committee of bank supervisors.
